What is the Churn Rate Metric?
The Churn Rate metric represents the proportion of all subscribers who could have discontinued their subscriptions in any period who actually did so. It provides a clear indication of customer retention and the percentage of subscribers being lost over time. By focusing only on billing-eligible subscribers, it gives services with a high concentration of non-monthly subscribers a more accurate picture of their retention performance.
You can find it in the Cleeng Dashboard under Analytics.
How is it Calculated?
The formula for calculating Churn Rate is:
Churn Rate = (Churned Subscribers) / (Subscribers at start of period eligible to churn)
- Churned Subscribers: The number of subscribers who canceled their subscriptions during the specified period.
- Subscribers at start of period eligible to churn: The number of active subscribers whose recurring subscription expiration date falls within the selected period. This excludes users with one-time purchases, non-recurring offers, or subscriptions expiring outside the time frame.
Example:
A service had 10,000 active subscribers at the beginning of the month. Of these, 1,000 had a subscription set to expire within the month. Out of these, 500 subscribers churned, leading to a churn rate of:
Churn Rate = 500 / 1,000 = 50%
How to Use the Churn Rate Metric in a Subscription Business
The Churn Rate metric is a crucial indicator of customer satisfaction and business sustainability. You can use it to:
- Assess Customer Retention: Track changes in churn rate over time to evaluate the effectiveness of retention strategies.
- Identify Problem Areas: Analyze churn rates across different subscriber segments or time periods to pinpoint areas needing improvement.
- Forecast Subscriber Growth: Use churn rate to predict future subscriber numbers and revenue.
FAQs
Are users in a grace period included in the Churn Rate calculation?
No, users in a grace period are not included in the Churn Rate calculation. They are considered active subscribers until the grace period expires and their subscription is fully terminated.
Are non-recurring offers (e.g., passes) included in the Churn Rate calculation?
No, non-recurring offers are excluded from the Churn Rate calculation. This metric specifically tracks subscription churn and does not apply to offers without recurring billing.
What factors can influence the churn rate?
Factors such as customer satisfaction, pricing, competition, product quality, and customer service can all impact the churn rate.